Mitsui, Nabaa Consider $20 Billion Refining and Petrochemical Complex in Yanbu

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Researched by Industrial Info Resources (Sugar Land, Texas)--Mitsui & Company Limited (TYO:8031) (Tokyo, Japan) and Nabaa Industrial Development and Investment Company Limited (Jeddah, Saudi Arabia) are reportedly contemplating a $20 billion refining and petrochemical project in Yanbu.

A feasibility study to prove the viability of the project is under way. The two companies will make a final investment decision when the study is completed in June 2010. Subject to the outcome of the study, the project is planned to be operational by 2019.

According to sources within the industry, the complex is to have a production capacity of "several million tons" of petrochemicals, using crude oil as feedstock to produce a range of up to 45 different petrochemical products.

Saudi Arabia has large oil and natural gas reserves, which offer it a competitive advantage over global competitors. Reserves of petroleum in the country have been estimated to be as high as 264 billion barrels, or roughly a quarter of the global proven reserves. Natural gas reserves have been placed at 250 trillion cubic feet, the fourth-largest in the world.

This advantage has seen Saudi Arabia move from a net importer of petrochemicals in the 1970s to its current position as one of the world's leading petrochemical exporters, supplying approximately 7% to 8% of the global requirements.

From a total production of just 2 million tons in 1970, Saudi Arabia currently produces about 60 million tons and plans to reach a production of 100 million tons by 2015, which would be a growth rate of about 12%. Just three decades ago, a Royal Commission launched the idea of the industrial cities at Jubail and Yanbu. These were developed from scratch at what were small fishing villages at the time, but which have proved so successful that work is under way to develop the Jubail 2 and Yanbu 2 industrial cities.

Yanbu is on the Red Sea coast of the country, providing ready access to the Suez Canal. The country is investing about $3.2 billion to develop the infrastructure required for Yanbu 2 and hopes to attract a further $30.6 billion as industries look to establish manufacturing complexes at the site.

Among the companies investing in Yanbu 2 is Saudi Aramco (Dhahran, Saudi Arabia), the state-owned national oil company of Saudi Arabia, which has several projects under way there. In conjunction with ConocoPhillips (NYSE:COP) (Houston, Texas), Saudi Aramco is proposing to build a 400,000-barrel-per-day refinery at Yanbu 2, and the two companies have set a deadline of February 28, 2010, for submissions of bids for a solids unit at the complex. All contracts are planned to be awarded by May this year, and construction is scheduled for completion by March 1, 2014.

Saudi Aramco is also involved through a 50:50 joint venture with Mobil Yanbu Refining Company (Yanbu, Saudi Arabia), a subsidiary of Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas), in the Saudi Aramco Mobil Refinery Limited (Samref) (Yanbu) project, which began operations in November 1984 and processes 400,000 barrels of crude oil daily.

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